Alexis Company recently completed 11,500 units of its single product, consuming
ID: 2577971 • Letter: A
Question
Alexis Company recently completed 11,500 units of its single product, consuming 35,000 labor hours that cost the firm $588,000. According to manufacturing specifications, each unit should have required 3 hours of labor time at $17.20 per hour.
rev: 10_29_2012
35.
Required information
On the basis of this information, determine Alexis's labor rate variance and labor efficiency variance.
rev: 10_29_2012
Choice A
Choice B
Choice C
Choice D
Choice E
Rate Efficiency A. $ 13,800 F $ 8,400 F B. $ 13,800 F $ 8,400 U C. $ 14,000 F $ 8,600 F D. $ 14,000 F $ 8,600 U E. $ 14,000 U $ 8,600 UExplanation / Answer
Answer:- Labor Rate variance = (Standard rate – Actual rate) * Actual hours
= ($17.2 per hour - $16.8 per hour)*35000 hours
= $14000 F
Labor Efficiency variance = (Standard hours- Actual hours)*Standard rate per hour
=(34500 hours – 35000 hours)*$17.2 per hour
= $8600 U
Where:-
Actual rate = Actual cost/total hours
=$588000/35000 hours = $16.8 per hour
Standard hours = Standard time per unit * Actual production
= 3 hours per unit*11500 units
=34500 hours
Standard cost =Standard rate hour*stanadard hour per unit*Actual units
=$17.2 per hour *3 stanadard hours per unit*11500 units
=$593400
Labor cost variance = Standard Cost – Actual cost
=$593400 -$588000
=$5400 U
Labor cost variance = Labor Rate variance+ Labor Efficiency variance
$5400 U= $14000 F +$8600 U
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